Future Energy Scenarios 2023 – Potential routes to meet with UK’s Net Zero future

 

ESO (National Grid Electricity System Operator) have published their Future Energy Scenarios 2023 report.

Future Energy Scenarios (FES) is an annual exercise with options for how the UK energy market evolves in the future. The report for 2023 looks at ways in which the UK can achieve Net Zero by 2050, as well as the governments commitments to a decarbonised electricity system by 2035. It also suggest what is required in the public and private sector to meet those future scenarios.

There are a range of possibilities outlined for the future electricity system, energy demand over the next 30 years and how the system will need to change to achieve the ambitious targets. The 2023 FES report covers the decarbonisation of heat and transport, the changing generation mix and the challenges that come with this and how the role of the consumer will be pivotal in driving and achieving change. 

The main theme of this year’s report is stressing that the time for action is now, and decisive action is required. ESO have outlined four possible scenarios with ‘Leading the way’ being the first to successfully achieve Net Zero by 2046 with energy efficiency improvements, highly engaged consumers and large investments in decarbonisation technologies.

Not all scenarios however reach the 2050 target. In the ‘Falling Short’ scenario, reliance on natural gas remains and there is slow progress on decarbonisation of transport and significant annual carbon emissions.

Both ‘Consumer Transformation’ and ‘System Transformation’ see the UK meet the 2050 target. ‘Consumer Transformation’ is driven by engaged consumers taking steps to improve energy efficiency, with their electricity demand smartly controlled to provide flexibility to the system.

‘System Transformation’ see’s less consumer change but significant changes on the supply side, with hydrogen used to heat homes with carbon capture, usage and storage.

ESO Scenarios:

 

Image: Future Energy Scenarios report 2023

Louise Hellyer, Commercial Risk Manager here at TotalEnergies summarises the key talking points surrounding the scenarios and provides insight on what action needs to be taken to overcome challenges, touching on government policy, data security and consumer confidence.

 

Generation mix: 

“There is a vast amount that feeds into the scenarios generated in the FES and there’s actually an overwhelming number of possible variations and outcomes due to uncertainty around political changes, technology, infrastructure changes and consumer engagement. What it does do is gives a view on some options and what is needed for each. In all scenarios demands drops compared to 2022 levels, the greatest reduction is seen in ‘Leading the Way’.

As you can see in the graph below in all four scenarios, renewables increases significantly, specifically offshore wind, which helps to displace other fuels (i.e., coal) and natural gas. It will then be a question on how much renewable generations we get online and which particular mix and therefore how much gas generation is required to fill the gap.

The graph below summarises the generation mix to cover demand in the four scenarios as well as baseline of 2022 for comparison:

 

Hydrogen on the horizon

Looking at both ‘System Transformation’ and ‘Leading The Way’ you can see how hydrogen really plays a bigger role here. To get to these levels, with widespread use of hydrogen for home heating, industry and HGVs, there will need to be significant development and testing as well as government direction. If we compare this to Consumer Transformation, there is low hydrogen production and high levels of renewables. This is all linked to the fact that homes in this scenario are built or adapted for using renewables.

 

Image: Future Energy Scenarios report 2023

Aviation and Carbon Negative Solutions 

In all scenarios, it’s evident that for the Aviation sector it will be challenging to reach Net Zero by 2050 and therefore a challenge for the country wide target. To get the country to Net Zero, carbon negative solutions will need to be implemented to offset their emissions. Due to government policy and sign off, these technologies (e.g., Carbon Capture Usage & Storage) are not expected to really come into play until after 2030.

Flexibility, Data security & confidence 

In  2022, the Demand Flexibility Service (DFS), was launched by the ESO and was used to manage national demand during peak winter days. Over a million consumers were rewarded for turning down their usage at certain times. With much higher projected volumes of weather dependant generation there will be a need for the shift to a higher magnitude of consumer flexibility to maximise efficiency of renewable supply, reduce balancing costs and ensure supply security. 

For much of the flexibility services to get their full benefit, consumers need to have confidence in security of their data. The automated and interconnected nature of the network to be able to service these products would be data driven and would require customers to continue to sign up to participate. Without confidence, uptake of the service could be very low. We did see that the flexibility service had success over last winter with payments for reducing electricity consumption during tighter periods so there can be some confidence in this to deliver but this would require a comprehensive uptake of smart metering solutions to maximise the benefit. With some peoples concern on smart solutions and data protection, consumer trust can’t be underestimated.

Definitive policy direction

For so much of this to turn into reality, clear and definitive policy direction with an understanding and acceptance on how funding will work is needed. The FES outlines some decision points showing the sooner the decisions are made the more likely we are to achieve the target. Ideally, we would like to see this as a cross party agreement to avoid changes of direction. The FES report shows that to  reduce the risk of falling short stakeholders will need to know what the direction of travel for the country is. This will help with their internal business cases for investment as well as deliver collective progress. Without this we risk not enough progress being made in time as people wait to make decisions.

There is no doubt many of these options will cost significant amounts of money, with disruption in the short term, so clarity is needed on funding, and confidence money is being spent correctly. This investment will be needed quickly to hit Net Zero targets and with a General Election expected in 2024 it is hard to see many firm decisions being made before this. Putting pressure on delivering Net Zero by 2050.” 

 

 

To read the full Future Energy Scenarios report, click HERE. 

To find out more about our Renewable Energy products, and how we can help you on your Net Zero journey, please click HERE.